By Janel King, Senior Associate, AJM
South Africa’s regulatory framework for crypto-assets is evolving in step with global transparency standards. The draft amendments to the regulatory framework governing the reporting of crypto assets propose the formal adoption of the Organisation for Economic Co-operation and Development’s (OECD) Crypto-Asset Reporting Framework (CARF), representing a significant step in aligning domestic regulation with international norms.
These changes affect both crypto-asset service providers and individual users, introducing detailed obligations for data collection, due diligence, and annual reporting to the South African Revenue Service (SARS).
South Africa’s Adoption of CARF
The OECD’s Crypto-Asset Reporting Framework establishes a global standard for the automatic exchange of information on crypto-assets. By incorporating CARF, the aim is to enhance tax transparency, curb evasion, and ensure that crypto-asset activities fall within a regulated and reportable framework.
The draft regulations also integrate the OECD’s Commentaries, Step-by-Step Guidance, and Frequently Asked Questions by legal reference. This means these international materials hold interpretative authority in cases of conflict.
Key Regulatory Changes
1. The “Wide Approach” to User Reporting
One of the most notable shifts is the introduction of a “wide approach”, requiring crypto-asset service providers (such as Luno, VALR, and Binance) to collect and report information on all users, irrespective of their country of tax residence. This ensures consistent compliance even in cases where no “exchange-of-information agreement” exists with another jurisdiction.
2. Defining When a Provider Operates “in South Africa”
A key clarification in the new regulations concerns when a crypto-asset service provider is considered “in South Africa” and therefore subject to local CARF reporting requirements. A crypto-asset service provider is considered to be “in South Africa” if it is:
- Resident, incorporated, or managed from South Africa, or
- Maintains a business presence in the country, or
- Provides services to South African tax residents.
3. Exemptions for Reporting in Other CARF Jurisdictions
Crypto-asser service providers that already comply with CARF obligations in another recognised CARF Partner Jurisdiction may avoid duplicate reporting, provided they notify SARS and submit evidence of compliance elsewhere. This mechanism allows for efficient cross-border compliance while preventing administrative duplication.
4. Expanded Definitions and Reporting Scope
The term “crypto-asset” has been broadened to include fungible and non-fungible tokens (NFTs) and cryptographic tokens representing ownership, membership, or claims, provided they are digitally transferable or tradeable. Excluded assets include central bank digital currencies (CBDCs) and non-transferable, closed-loop assets, subject to strict criteria.
5. Enhanced Due Diligence and Record-Keeping
Service providers are now required to:
- Obtain self-certifications of tax residency from all users and controlling persons.
- Validate this information against KYC and AML documentation.
- Act on any changes in a user’s circumstances within 90 days.
- Retain all records for at least five years.
Failure to obtain valid self-certification may require the suspension or termination of user services.
Responsibilities of Providers and Users
Crypto-asset service providers must:
- Identify and classify all users.
- Collect, validate, and monitor tax residency information.
- Monitor tax residency changes.
- Report user and transaction data to SARS annually.
- Apply CARF valuation and aggregation rules.
- Retain records and enforce compliance.
Crypto-asset users are responsible for:
- Providing accurate and timely tax self-certifications for tax residency.
- Updating service providers on any tax status changes.
- Supplying supporting documentation when requested.
- Ensure to not engage in practices designed to evade reporting obligations.
Non-compliance may result in penalties under section 26(4) of the Tax Administration Act and a loss of access to crypto-asset services.
How AJM Can Help
Complying with these evolving requirements is crucial for service providers and users alike. Our team assists:
- Crypto service providers with preparing and submitting returns, identifying reportable users, and assessing exemption eligibility.
- Crypto-asset users with accurate crypto calculations, gain reporting, and tax compliance support.
By combining regulatory insight with practical implementation expertise, we help clients navigate the transition to CARF compliance with confidence and efficiency.